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Week – 48
The 28th Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change (UNFCCC) is off to a rocky start. There are fears that the event, hosted by the UAE, one of the world’s biggest oil and gas producers, will be hijacked by fossil fuel interests, while Saudi Arabia is said to be trying to lock poor countries into increasing their use of fossil fuels for decades to come.
The news comes as the first Global Stocktake is published, which sets out how countries are performing against the Paris Agreement targets to keep average temperature rises to “well below 2C” and ideally below 1.5 degrees Celsius. The answer, in a nutshell, is not well. Current commitments by countries in their nationally determined contributions (NDCs) put us on track for a warming of about 2.4C.
The consequences of climate change have been starkly illustrated across the world, not just in the Middle East, where November saw floods in Dubai and Jeddah, but across the world, from the Panama Canal, where drought has stopped ships from getting through the waterway, to Pakistan, where huge floods saw a third of the country under water. And 2023 is on course to be the hottest year on record globally in the wake of heatwaves and extreme weather, everywhere from Peru to the Philippines.
Add in the war in Ukraine and the conflict in Gaza, and the backdrop for investors who want to invest in tackling climate change and the energy transition is inauspicious, to say the least, according to a wide range of sustainable finance experts.
Despite the challenges, there are some reasons for optimism. The International Energy Agency says that investment in clean energy needs to rise from $1.2 trillion in 2023 to $4.5 trillion a year by 2030. Institutions want to invest, but they are being hampered by high inflation and interest rates, which have increased the cost of renewable energy projects.
There are a few measures that we know are likely to emerge from the summit, including targets to triple renewable energy capacity and double energy efficiency improvements by 2030, as well as a pledge by the oil and gas sector to end methane emissions by the end of the decade.
For many investors, the summit will only be truly successful if it includes a target to phase out fossil fuels. Investors would also like to see other barriers to investment eased, including upgrading grid capacity and network connections.
In light of the growing impacts that extreme weather events are already having on the global economy, COP28 is likely to have a stronger focus on adaptation than previous COPs, while there will also be an increased emphasis on nature in the wake of the COP15 biodiversity summit in 2022.
The obstacles to progress at COP28 are more political than technical. And it may be that the combination of the Stocktake and the furor over oil producers’ efforts to hinder the transition will speed it up instead.
